Disney Buying Fox Film, TV Units for $52 Billion in Digital Push

Traders work at the post where Walt Disney Co. stock is traded on the floor of the New York Stock Exchange (NYSE) in New York, U.S., December 14, 2017. REUTERS/Brendan McDermid

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By Aishwarya Venugopal and Jessica Toonkel (Reuters)

Walt Disney Co (DIS.N) has struck a deal to buy film, television and international businesses from Rupert Murdoch’s Twenty-First Century Fox Inc (FOXA.O) for $52.4 billion in stock, giving the world’s largest entertainment company an arsenal of shows and movies to combat growing digital rivals Netflix Inc (NFLX.O) and Amazon.com Inc (AMZN.O)

The deal brings to a close more than half a century of expansion by Murdoch, 86, who turned a single Australian newspaper he inherited from his father at the age of 21 into one of the world’s most important global news and film conglomerates. The new, slimmed down Fox will focus on TV news and sport.

Early indications are that the deal will not face strong resistance from antitrust regulators as AT&T Corp’s (T.N) bid to acquire Time Warner Inc (TWX.N) has done. U.S. President Donald Trump, who has attacked the AT&T deal, spoke to Murdoch on Thursday and congratulated him on the deal, according to the White House.

Shares of Fox, which have surged more than 30 percent since talk of the deal surfaced in early November, closed up 6.5 percent. Disney shares rose 2.7 percent, spurred on by the company’s plan to buy up to $20 billion of its own shares to offset dilution from the all-stock deal. Disney will also assume about $13.7 billion of Fox debt in the deal.

Fox stockholders will receive 0.2745 Disney shares for each share held and will end up owning about a quarter of Disney.

Under the deal, expected to close in 12 to 18 months, Disney acquires 21st Century Fox’s film and television studios, its cable entertainment networks and international TV businesses.

That brings marquee franchises like “Avatar” and “The Simpsons” inside the Mouse House, on top of Iger’s previous purchases, including Pixar Animation Studios, Marvel Entertainment and “Star Wars” producer Lucasfilm.

The deal also includes 22 of Fox’s regional sports networks that have the rights to televise live games of U.S. professional baseball, basketball and hockey teams as well as popular college and high school games.

Disney’s global footprint expands with the acquisition of Fox’s international satellite assets, including Star TV network in India and a stake in European pay-TV provider Sky Plc (SKYB.L) and sports rights in several countries.

The new pipeline of shows and movies will help Disney battle technology companies siphoning audiences away from traditional TV networks

Amazon is on track to spend at least $4.5 billion on video this year, according to analyst estimates, while Netflix plans to spend $8 billion on content next year. That is closing the gap on Disney, which spent $13.5 billion on content, half of that on sports, in the latest fiscal year, according to analysts.

“The deal illustrates the huge strategic challenge traditional media companies face and how they need to reinvent their business models to compete with digital, online competitors such as Netflix, Google and Amazon,” said Nick Jones, partner and head of technology at Cavendish Corporate Finance. “(It) helps Disney dramatically reduce its reliance on traditional television, a business that has declined over the last two decades.”

‘NEW’ FOX

Immediately before the acquisition, Fox will separate the Fox Broadcasting network and stations, Fox News Channel, Fox Business Network, its sports channels FS1, FS2 and the Big Ten Network, into a newly listed company that it will spin off to its shareholders.

“This will be a growth company, centered on live news and sports brands and the strength of the Fox network,” 21st Century Fox Executive Chairman Murdoch told investors. He said Fox was not retreating, rather “pivoting at a pivotal moment.”

Disney Chief Executive Bob Iger, 66, will extend his tenure through the end of 2021 to oversee the integration of the Fox businesses. He has already postponed his retirement from Disney three times, saying in March he was committed to leaving the company in July 2019.